Why did the government cancel the bond auction of 11-Feb and what it means?
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Looking into the market condition, there won't be any change in the monetary policy and market will remain flat.
The government has decided to cancel the bond auctions that were scheduled on Feb-11 following a sharp spike in the 10-year benchmark government bond yields to 6.9%. Union Budget 2022 has sharply raised the total borrowings for FY23 to Rs.14.95 trillion from Rs.12 trillion, a spike of 25%. That spooked bond markets leading to a rise in bond yields.
High bond yields have resulted in several bond issues devolving on the RBI, which is considered to be inflationary as it leads to money creation. The RBI will announce the last monetary policy of FY22 on 10-Feb and that could have some cues. Several bond auctions in the past had to be dropped due to the high yields demanded by banks and this was one more such case.